1.0 Introduction

A superannuation fund is constituted by a trust deed. The trustee invariably maintains disability insurance cover of fund members in respect of total and permanent disablement under a group policy. There is a contract between the member and the trustee and one between the trustee and the insurer. A member is now acknowledged as having a direct entitlement to a disablement benefit against both the trustee and the insurer (see Trident General Insurance Co Ltd v McNiece Bros Pty Ltd; McArthur v Mercantile Mutual Life Insurance Co Ltd). Disability cover is often in the same terms in the trust deed and the policy but it can vary. A successful disability claim will usually lead to an entitlement against both the trustee and the insurer with payment of the benefit by the insurer.

1.1 Cover

An employee of a superannuation fund will be the subject of disability insurance as a member. The trustee is required to offer compulsory insurance in respect of incapacity. The trustee, as policy-owner, is obliged to pay the premiums although members must usually make some contributions. A trust structure is the subject of significant regulation providing the minimum level of cover.2

In the absence of particular alternative cover which meets the prescribed standards, a member will be covered by a default fund, known as the MySuper fund which meets the minimum conditions.3

From 1 July 2017, a member will be entitled to transfer his/her life insurance cover within 90 days of joining the fund or on each anniversary of joinder. In the absence of such an election, a member will attract membership of the MySuper fund.

The ability to opt out and transfer insurance cover is intended to avoid membership of multiple super funds with a duplication of insurance premiums. However, a vast majority of members are members of the MySuper fund. That fund is considered to provide the most effective and efficient superannuation cover with fiduciary obligations imposed.

1.2 Disablement claims

Redress from unfair decisions by superannuation trustees and insurers lies in procedures in both the general law and statute. Resort can be had to the courts or to the Superannuation Complaints Tribunal. The approach required by each differs considerably.

Common law redress is sought directly from the courts and usually seeks a determination that the trustee and insurer have failed, contrary to the material before them and their duty of good faith to a beneficiary, to make a finding of total and permanent disablement as defined, excluding a benefit under the trust deed and the associated insurance policy.

The alternative approach is by a complaint to the Superannuation Complaints Tribunal under the Superannuation (Resolution of Complaints) Act 1993. That Act establishes an alternative statutory system for the resolution of complaints by members of superannuation funds in relation to the decisions of trustees and insurers. The statutory system is intended to provide a low cost and expeditious resolution mechanism, although some challenge its efficacy. A successful outcome is expressed to depend upon whether the complaint is fair and reasonable. The system includes the provision of conciliation, a review meeting and an ability to appeal to the Federal Court.

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